Greece also announced strict capital controls that include a bank holiday through the July 5th vote in order to stave off a bank run which had begun over the weekend with massive lines of people at banks and ATMs trying to withdraw cash. As a result of the combined news, world markets turned sharply negative yesterday on heightened expectations of a Greek default on their debt obligations and the growing possibility that the country will be forced to leave the Euro currency.
Adding to the uncertainty Greece has a €1.6 billion ($1.7 billion) debt payment to the International Monetary Fund (IMF) due June 30 and Eurozone finance ministers say they will not allow an extension of that deadline through the referendum vote next week.
While news of a Greek default combined with the imposed capital controls would certainly be painful for those in the country, we currently see little evidence that contagion would spread to the rest of the Eurozone. Most of Greece’s debt is owned by the IMF and the European Central Bank (ECB) and not by investors and national governments, so a default is believed to be contained. Lastly, given the size of Greece’s economy compared to the Eurozone as a whole, a Greek exit, or ‘Grexit’, from the Euro would not pose a large threat to accelerating economic growth we are beginning to see in much of Europe.
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